Turnkey Companies to Use?
Adam WellsPro Member
Member since 2021 · 17 posts · 5 votesTurnkey Companies to Use?
Most Popular Reply
Zach LemasterBusiness Member
Rental Property Investor · Denver, CO · Member since 2015 · 1k+ posts · 3k+ votesWelcome! Here are some good posts to read through to answer your questions on RTR. I'm happy to answer any questions you have at any point in time, and we look forward to connecting with you!
https://www.biggerpockets.com/users/ZacharyCole/references
https://www.biggerpockets.com/forums/92/topics/518583-feedback-on-renttoretirement-and-zach-lemaster
https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review
21 Replies
- 4yZach LemasterBusiness MemberRental Property Investor · Denver, CO · Member since 2015 · 1k+ posts · 3k+ votes
Welcome! Here are some good posts to read through to answer your questions on RTR. I'm happy to answer any questions you have at any point in time, and we look forward to connecting with you!
https://www.biggerpockets.com/users/ZacharyCole/references
https://www.biggerpockets.com/forums/92/topics/518583-feedback-on-renttoretirement-and-zach-lemaster
https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review
- Member since 2021 · 17 posts · 5 votes4yYeah man. I would love to hear about your experiences with both companies and any contact information you had. How is best way for us to connect?
- Investor · Fort Collins, CO · Member since 2014 · 123 posts · 329 votes4y
@Adam Wells I'd really recommend Rent to Retirement. I've done 7 deals through them and counting. I also have a number of friends/colleagues who have had great experiences with them. I'd be happy to chat about my experience if it would be helpful.
- 4yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
Quote from @Adam Wells:
Good Morning BP Fam. Was wondering if anyone had any experience with some turnkey investment companies they would recommend. I have heard of Rent to Retirement, and I a call set up with them this month. Just wanting to do my due diligence and see if there were any more refutable companies out there.
A lot depends on where you are looking to invest and if you want to deal directly with a company or use a promoter or intermediary. The passive investment industry has fractured a bit and that leaves investors a few different choices and options of how to go about investing. The word Turnkey is part of the issue. It has very little meaning for an investor who wants to compare different opportunities. It is really on the investor to know what he means by the word Turnkey when they are looking to invest. Some companies buy and sell but do not manage. Companies buy in different price points and parts of town. Companies have differing opinions on how much work needs to be done and what constitutes a good deal for an investor. And still some companies market as Turnkey but don't actually buy or manage anything. They specialize in pointing investors in certain directions and everything I mentioned above comes with the description as "turnkey". You also run into the issue of paid promotions where investors are compensated for sending referrals. None of that is bad, it is just hard to determine how to actually compare and contrast differing companies and opportunities.
With that, I would look at a few companies.
Certainly Rent to Retirement is a company who has built a great reputation. It is hard if not impossible to find any negative comments about them. I think someone mentioned Martel Turnkey which is another company that it is hard to find negative comments. Those are good things in my estimation. You definitely want to do business with a company that has an established track record. They still have to earn your trust - don't give that away to anyone for free. Make any company earn the right to do business with you. But, it is always a positive to have good reviews and both of those companies certainly seem to hit their clients expectations.
I would also look into Jacksonville Wealth Builders out of Florida. Solid company that has been around for over a decade and a half. That kind of longevity is really good. I would absolutely look into my families' company as well which fits the mold I described above. Texas Turnkey operates out of Houston and Albuquerque. I think Bridge Turnkey is Kansas City and Texas and Pinnacle Turnkey is in Kansas City and Indianapolis. These are all solid companies whose owners have a reputation as good business persons. Spartan out of Alabama is also a solid company. That gives you half a dozen different companies to review across a few different markets.
The bottom line is start looking around and exploring.
- 4yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votesI forgot to add this to my post.
Here are some questions that I have posted many, many times here on BP that you should be asking a property management company and absolutely asking any Turnkey company you are going to do business with. I'm happy to give what I think are the best answers to these as well. Again, I made this list based on my own experiences.
Two important things to remember. One, if they don't have time to spend with you and answer your questions in detail and discuss them, in my opinion, move on. Two, a key about asking questions is to ask a mirror question. Many companies have learned how to sell and how to market and certainly how to answer questions like this. Often answers are scripted and your job as an investor is to ask the right questions in the right way to answer for yourself whether you can trust what you re hearing. It is also important to remember that investors like myself always advise meeting who you're going to do business with. That is important because it allows you to see for yourself if the answers you heard match what you see on the ground. A mirror question is where you ask what is the average vacancy rate each month. Write down the answer. Sometime later in the conversation you ask the mirror question of what is your average occupancy each month. Write that answer down.
A high quality company will be on top of their KPI's and their numbers will match. A 3.5% vacancy number will match a 96.5% occupancy number.
Lastly, after you have their numbers research what you were told. I'll never forget a conversation with an investor who was amazed that a turnkey company had a 1.5% vacancy rate and a 98.5% occupancy. It sounded amazing. He asked how many properties they managed and the answer was roughly 1500. He then went onto their website online and researched their property management online and was shocked. Their website listed 198 properties for rent. They had an ad online for prospective tenants advertising 200+ vacant rentals. Their true vacancy rate was roughly 13% not 1.5%. But they felt like they had to market a low rate to "keep up with the Joneses". So ask your questions, get your data and do your research.
Are you an investor?
Do you own in the exact neighborhoods you are selling?
How many investors do you work with?
Do you own all facets of the operation?
Do you offer rental or maintenance guarantees? If they answer yes, ask them why. Then ask them if they will put the guarantee on year three.
Do you defer maintenance?
How many properties do you manage?
Do you own the properties you sell?
How long have you been in the business?
What is your average vacancy rate?
What percentage of expiring leases will renew their lease each month?
What percentage of signed leases fulfill their full term?
What is the average number of days a property is vacant between tenants, move-out to move-in?
What percentage of billed rent do you collect each month?
What is the cost of an average repair bill after move-out?
What are your management fees?
What percentage of collected rent goes to yearly maintenance on average?
What is your average number-of-months occupancy per property?
What is your average occupancy rate?
What programs do you have in place to keep residents happy?
What customer service programs do you have in place?
Will you call me every month with an update on my portfolio?
How many team members are dedicated solely to providing service to your clients?
What has been your biggest mistake as an investor? How do you protect your clients from making the same mistakes?
- Real Estate Agent · Germantown TN · Member since 2021 · 21 posts · 5 votes4yI'll add on to Chris's post above as well.
Be patient getting into this & talk to as many people as you can on the front end. Do all this to make sure you find the right fit for you specifically. - Member since 2021 · 17 posts · 5 votes4y
Quote from @Chris Clothier:
I forgot to add this to my post.Here are some questions that I have posted many, many times here on BP that you should be asking a property management company and absolutely asking any Turnkey company you are going to do business with. I'm happy to give what I think are the best answers to these as well. Again, I made this list based on my own experiences.
Two important things to remember. One, if they don't have time to spend with you and answer your questions in detail and discuss them, in my opinion, move on. Two, a key about asking questions is to ask a mirror question. Many companies have learned how to sell and how to market and certainly how to answer questions like this. Often answers are scripted and your job as an investor is to ask the right questions in the right way to answer for yourself whether you can trust what you re hearing. It is also important to remember that investors like myself always advise meeting who you're going to do business with. That is important because it allows you to see for yourself if the answers you heard match what you see on the ground. A mirror question is where you ask what is the average vacancy rate each month. Write down the answer. Sometime later in the conversation you ask the mirror question of what is your average occupancy each month. Write that answer down.
A high quality company will be on top of their KPI's and their numbers will match. A 3.5% vacancy number will match a 96.5% occupancy number.
Lastly, after you have their numbers research what you were told. I'll never forget a conversation with an investor who was amazed that a turnkey company had a 1.5% vacancy rate and a 98.5% occupancy. It sounded amazing. He asked how many properties they managed and the answer was roughly 1500. He then went onto their website online and researched their property management online and was shocked. Their website listed 198 properties for rent. They had an ad online for prospective tenants advertising 200+ vacant rentals. Their true vacancy rate was roughly 13% not 1.5%. But they felt like they had to market a low rate to "keep up with the Joneses". So ask your questions, get your data and do your research.
Are you an investor?
Do you own in the exact neighborhoods you are selling?
How many investors do you work with?
Do you own all facets of the operation?
Do you offer rental or maintenance guarantees? If they answer yes, ask them why. Then ask them if they will put the guarantee on year three.
Do you defer maintenance?
How many properties do you manage?
Do you own the properties you sell?
How long have you been in the business?
What is your average vacancy rate?
What percentage of expiring leases will renew their lease each month?
What percentage of signed leases fulfill their full term?
What is the average number of days a property is vacant between tenants, move-out to move-in?
What percentage of billed rent do you collect each month?
What is the cost of an average repair bill after move-out?
What are your management fees?
What percentage of collected rent goes to yearly maintenance on average?
What is your average number-of-months occupancy per property?
What is your average occupancy rate?
What programs do you have in place to keep residents happy?
What customer service programs do you have in place?
Will you call me every month with an update on my portfolio?
How many team members are dedicated solely to providing service to your clients?
What has been your biggest mistake as an investor? How do you protect your clients from making the same mistakes?
Chris! My man! Thanks for all the helpful insight and information. It is very much appreciated. Please if there is anything I can do to return the favor, please feel free to reach out. I am going to talk with as many companies as I can and this list of questions is a great template for a new investor like me to use. Awesome stuff. Thank You!
- Investor · Member since 2019 · 59 posts · 73 votes4y
@Adam Wells congratulations on getting started! Just like any investing, real estate is not without its issues. Make sure you have a large buffer to deal with unexpected issues. We had lots of damage to one property and an eviction with another in the first year of ownership with TK. Some things couldn’t have been avoided, some were perhaps tenant criteria that the PM used. We have learned a whole lot and I am just glad we kept a cushion of cash to pay the mortgages when without a tenant!
- Investor · Member since 2019 · 59 posts · 73 votes4y
@Chris Clothier great list! Thanks!
- Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes4y
I started with turnkey remote rentals in 2009-2015 while working my engineering W2 job. Then went into syndications once my net worth went over 500k.
If you have any specific questions let me know.
- 4yMike D'ArrigoPro MemberTurn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
@Adam Wells I think that @Chris Clothier nailed it with his response. One thing you might want to do is narrow your choice down to 1 or 2 markets and identify turn key companies operating in those markets. Do your due diligence on any company that you're considering and as Chris suggested, understand what consider to be turn key. The industry has been going though some transition and everyone defines turn key differently. Here are some things to watch out for and avoid as you evaluate different companies:
- Don't allow financing or a finance contingency (it can be a good indication they are selling above market value)
- Don't allow for your own independent property inspection
- Are not realistic with their pro forma's (i.e. they don't include vacancy or maintenance projections or use unrealistically low vacancy factors)
- Require you to pay for any renovation upfront
- Sell only in cheap. low end neighborhoods
- Don't accurately represent the neighborhood/property classification
- Don't have consistent rehab standards for all properties
- Don't provide a scope of work for the property
- Can't provide references of repeat investors
- Member since 2017 · 9 posts · 9 votes4y
I have several years experience with turnkey in the Greater Little Rock market.
Step one is choosing a solid market that has reputable turnkey providers and management available.
Step two is getting on their buyer list to get a sense of their product and how they run their numbers. Just like how in business you can assess capital projects differently (payback, IRR, NPV), each turnkey operator analyzes and markets differently so consider that accordingly. You will get a sense of what good deals are because there is variance in their offerings.
Step three is picking one that aligns with your interests. For example, the management company I use retains the late fee and charges 10% markup for maintenance. The result is, although they do not admit this, they allow tenants to pay late which causes major issues long-term. If their management fee is 8% and they suddenly collect a $50 late fee, they are almost doubling their revenue. From a business standpoint, they have a financial/business incentive that is contrary to owner interests. Same for maintenance, if they have such a markup then what incentive is there for them to fix something correctly. My advice is use a company that charges a flat rate and negotiate a way for your to retain the late fee if possible.
Full disclosure, I do not recommend turnkey at this time. It's a great entry point to get some experience, but the numbers do not make sense in this market even in a place like Little Rock which is easy cashflow. You can get better returns on your cash with less risk by doing hard money lending or being totally passive and investing in market indexes.
- Member since 2021 · 17 posts · 5 votes4y
Thanks Robert. Great info. I'm not real knowledgeable on investing in market indexes. Can you shed a little light on that for me?
- 4yMackaylee BeachPro MemberReal Estate Agent · Kansas City, MO · Member since 2020 · 1k+ posts · 492 votes
@Adam Wells You should expand your research on turnkey companies. There are companies out there that are direct to the seller and boots on the ground, rather than a company who is not boots on the ground. You'll receive better pricing and return on investment overall.
- Member since 2021 · 17 posts · 5 votes4y
Thanks. You know of any great companies?
- 4yMackaylee BeachPro MemberReal Estate Agent · Kansas City, MO · Member since 2020 · 1k+ posts · 492 votes
@Adam Wells I'd be happy to help you navigate Kansas City market if you have interest there. I am boots on the ground in KC which is something my clients really appreciate!
- Member since 2021 · 17 posts · 5 votes4y
- Member since 2021 · 17 posts · 5 votes4y
Quote from @Mackaylee Beach:
@Adam Wells I'd be happy to help you navigate Kansas City market if you have interest there. I am boots on the ground in KC which is something my clients really appreciate!
Open to options
- Investor · Australia · Member since 2019 · 49 posts · 30 votes4y
Quote from @Chris Clothier:
I forgot to add this to my post.Here are some questions that I have posted many, many times here on BP that you should be asking a property management company and absolutely asking any Turnkey company you are going to do business with. I'm happy to give what I think are the best answers to these as well. Again, I made this list based on my own experiences.
Two important things to remember. One, if they don't have time to spend with you and answer your questions in detail and discuss them, in my opinion, move on. Two, a key about asking questions is to ask a mirror question. Many companies have learned how to sell and how to market and certainly how to answer questions like this. Often answers are scripted and your job as an investor is to ask the right questions in the right way to answer for yourself whether you can trust what you re hearing. It is also important to remember that investors like myself always advise meeting who you're going to do business with. That is important because it allows you to see for yourself if the answers you heard match what you see on the ground. A mirror question is where you ask what is the average vacancy rate each month. Write down the answer. Sometime later in the conversation you ask the mirror question of what is your average occupancy each month. Write that answer down.
A high quality company will be on top of their KPI's and their numbers will match. A 3.5% vacancy number will match a 96.5% occupancy number.
Lastly, after you have their numbers research what you were told. I'll never forget a conversation with an investor who was amazed that a turnkey company had a 1.5% vacancy rate and a 98.5% occupancy. It sounded amazing. He asked how many properties they managed and the answer was roughly 1500. He then went onto their website online and researched their property management online and was shocked. Their website listed 198 properties for rent. They had an ad online for prospective tenants advertising 200+ vacant rentals. Their true vacancy rate was roughly 13% not 1.5%. But they felt like they had to market a low rate to "keep up with the Joneses". So ask your questions, get your data and do your research.
Are you an investor?
Do you own in the exact neighborhoods you are selling?
How many investors do you work with?
Do you own all facets of the operation?
Do you offer rental or maintenance guarantees? If they answer yes, ask them why. Then ask them if they will put the guarantee on year three.
Do you defer maintenance?
How many properties do you manage?
Do you own the properties you sell?
How long have you been in the business?
What is your average vacancy rate?
What percentage of expiring leases will renew their lease each month?
What percentage of signed leases fulfill their full term?
What is the average number of days a property is vacant between tenants, move-out to move-in?
What percentage of billed rent do you collect each month?
What is the cost of an average repair bill after move-out?
What are your management fees?
What percentage of collected rent goes to yearly maintenance on average?
What is your average number-of-months occupancy per property?
What is your average occupancy rate?
What programs do you have in place to keep residents happy?
What customer service programs do you have in place?
Will you call me every month with an update on my portfolio?
How many team members are dedicated solely to providing service to your clients?
What has been your biggest mistake as an investor? How do you protect your clients from making the same mistakes?
5 star advice.
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